LTA announcement means it’s easier to buy a more efficient vehicle in 2021, but not all models will benefit

SINGAPORE

The Land Transport Authority (LTA) announced yesterday that the Vehicular Emissions Scheme (VES) ‘will be enhanced with increased rebates and higher surcharges…to take effect on January 2021 and last till December 31, 2022.’

The biggest change is an increase of S$5,000 to all rebates and penalties. In other words, cars that had a S$10,000 rebate previously will now have a S$15,000 one, and vice versa. Taxis will incur even higher rebates/penalties, as they are on the road more than regular passenger cars. Refer to the table below. 

Rebate increases will start on January 1 2021, while surcharge increases will be in effect from July 1, 2020 to allow the industry time to get used to the surcharges. The actual VES pollutant bands/types will remain unchanged, as stated on the LTA website here. 

How does this affect my wallet in 2021?

VES rebate up by S$5,000 – that means everything will be cheaper in 2021! Not so fast, have a look at our handy table below first.

If you’re totally lost, and we don’t blame you, just concentrate on the rightmost ‘price difference’ column: That indicates the potential price difference of these cars compared to January 2021, assuming all other things like COE and OMV stay the same (tip: the former won’t be, in real life). 

Before we explain in detail here’s the takeaway: Most cars, that is cars in the B/neutral band, are not affected. Efficient/cleaner cars, those in the A2 and A1 bands, get a S$5,000 discount in 2021, though this doesn’t apply to the most inexpensive cars. Conversely, cars with a C1 or C2 banding get an additional S$5,000 penalty come 2021. 

How does this chart work? A car’s price is OMV + Registration Fee + ARF + GST/Excise Duty + COE. The column ‘price difference’ is the difference in ARF come 2021, and since ARF is a component of car cost, it is a cost saving on the whole.

This VES increase doesn’t mean a S$5k price saving across the board. Since it’s VES it only affects those cars that aren’t in the B or neutral band. As we refer to in the chart, most mainstream cars in Singapore are under B – this includes pretty much every mainstream sedan out there like the Honda City, Honda Civic, Toyota Corolla Altis and so on. Some standouts are the Mazda 3 and the Hyundai Avante, both of whom get a S$5k bonus for being in A2. 

You’ll notice that under a certain price point the extra S$5k doesn’t materialise, because the mandated minimum ARF is S$5k. Since VES is deducted from ARF, and ARF is calculated from OMV, your ARF/OMV must be more than S$15k to see a difference. 

Who else wins? Hybrids, since the majority of them land in the VES A2 band they also get an extra discount. 

Who loses? Any car in the C1 or C2 band. But considering most of these cars are either large or expensive, or both, it’s not a big difference. Considering the Mercedes-Benz C 180 at S$195,888 with COE, $5k extra is a 2.6 percent difference, compared to a 5 percent difference for a S$100k Avante.

On paper, it looks like the VES is continuing to do what a good carbon or pollution tax should do: Make it easier for mainstream buyers to switch to greener and more efficient cars. 

The other big question is: Will this affect EV prices? Yes, they will come down further thanks to VES and the Electric Vehicle Early Adoption Initiative rebate, but we are still figuring out how it’ll all going to work. Check this space for updates.

Singapore’s modern emissions penalty/rebate scheme came into effect as CEVS, or Carbon Emission-Based Vehicle Scheme (CEVS) in 2015, and was revised in mid 2015 and lasted until 2017. Those schemes took only CO2 (carbon dioxide) into account, and it was expanded to Vehicular Emissions Scheme in 2018, sorting vehicles into bands judged on five pollutant criteria. 

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